Selling procurement software is easy. Behind the pitch-deck, however, the sector is the dullest of fields for technology. There just aren’t many problems to solve and the rewards diminish with scale.
The only measurable return is reduced headcount
Abstract aspirations like spend visibility and supplier enablement feature in business cases but the CFO skips over them to look for hard numbers in the RoI document, and these are fewer people doing the work. Contract-drafting, RFQs, spend analytics, invoice reconciliation - each benefit is measured in headcount reduction.
Savings are just more headcount reduction
The second selling point is savings - on the spend itself, rather than the people managing it. It sounds separate and additional but it isn’t. Savings not already being worked on are likely to have already been classified as too small or too scattered to justify effort. Aggregating and automating them may drive efficiency but only where the rewards were marginal to begin with.
Old technology with new branding
Behind the procurement tech-talk what you find are rules-engines and workflow-automation that have been mature for over quarter of a century. Purchase orders, supplier records, contract terms, invoice lines are database-, not data-problems. The innovation on offer is better UX through interface-polish and integration-plumbing, repackaged with this decade’s vocabulary.
The hard problems don’t belong to one company
There are real Big Data problems in procurement-related areas. Supplier risk, demand signals, geo-political indicators and social network data are all valid external sources of information. But few procurement departments can build a business case for owning capabilities with contingent or sporadic applications. These are better suited to specialist providers operating across hundreds of clients. And that is where this market is moving.
Adding it up
A finite set of processes to automate. Value capped by the manpower reduction. Savings too small to have mattered previously. Diminishing returns with each step. And the hard problems living somewhere else. Those are the components of the RoI.
Set against sales and marketing where the addressable prize is revenue - open-ended compounding and scalable - they spell out meagre rewards.
CFOs find a business case for quotidian savings far easier to understand than one based on growth driven by changing behaviours; and that is what has pulled so many tech entrepreneurs into the Procurement sector. But most have failed to look critically at the real benefits to the client, beyond the improved UX and some headcount reduction.
I feel for them - and their investors.